Solution Manual for Managing Human Resources 16th Edition

Snell Bohlander 1111532826 9781111532826

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chapter

STRATEGY AND
2 HUMAN RESOURCES PLANNING

This chapter discussed strategic human resource management (SHRM), including scanning the
competitive environment and conducting an internal analysis to gauge the firm’s strengths and
weaknesses. This involves looking at the firm’s “three Cs”—its culture, competencies, and
composition. When employees’ talents are valuable, rare, difficult to imitate, and organized, an
organization can achieve a sustained competitive advantage through people. As organizations plan
for the future, top management and strategic planners must recognize that strategic-planning
decisions affect—and are affected by—HR functions. Human Resource Planning (HRP), then, is a
systematic process that involves forecasting the demand for labor, performing supply analysis, and
balancing supply and demand considerations. Firms need to establish a set of parameters that
focus on the “desired outcomes” of strategic planning, as well as the metrics they will use to
monitor how well the firm delivers against those outcomes. Issues of measurement, benchmarking,
alignment, fit, and flexibility are central to the evaluation process.
CHAPTER LEARNING OUTCOMES

LEARNING OUTCOME 1 Identify the advantages of integrating human resources planning

and strategic planning.

LEARNING OUTCOME 2 Understand how an organization’s competitive environment

influences its strategic planning.

LEARNING OUTCOME 3 Understand why it is important for an organization to do an internal

resource analysis.

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
14 Part 1: Human Resources Management in Perspective
 LEARNING OUTCOME 4 Describe the basic tools used for human resources forecasting.

LEARNING OUTCOME 5 Explain the linkages between competitive strategies and HR.

LEARNING OUTCOME 6 Understand what is required for a firm to successfully implement

a strategy.

LEARNING OUTCOME 7 Recognize the methods for assessing and measuring the
effectiveness of a firm’s strategy.

LECTURE OUTLINE
Note: Figure 2.1 can be useful to provide students with both an overview and a review of the
entire chapter.

I. STRATEGIC PLANNING AND HUMAN RESOURCES

Human resources planning (HRP) is the process of anticipating and providing for the
movement of people into, within, and out of the organization. HRP is done to achieve the
optimum use of the firm’s human resources, so that it has the correct number and types
of employees needed to meet organizational goals. Strategic human resources
management (SHRM), by contrast, can be thought of as the pattern of human resource
planning and deployment activities that enable a firm to achieve its strategic goals.
A. Strategic Planning and HR Planning: Linking the Processes
Ideally, HRP and strategic organizational planning should coincide. On the front end,
human resource planning provides a set of inputs into the strategic formulation process
in terms of what is possible; that is, whether the types and numbers of people are
available to pursue a given strategy. On the back end, strategic planning and HRP
are linked in terms of implementation concerns, such as determining if people are
available internally or externally to implement the strategic organization plan. The
ability to act and change the organization rapidly to pursue different strategic
opportunities is referred to as organizational capability.

II. STEP ONE: MISSION, VISION, AND VALUES

As James Walker put it, because all business issues have people implications, all human
resources have business implications. As a result, HR managers need to engage in strategic
© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
15 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
15

planning alongside other top managers. The firm’s mission is the basic purpose of the
organization. It is the reason for the organization’s existence. The firm’s strategic vision is
a perspective on where the company is headed and what it can become in the future. The
firm’s core values are the enduring believes and principles that a company uses a
foundation for its decisions. These are the underlying parameters of how the company will
act toward its stakeholders and the public in general.

III. STEP TWO: ENVIRONMENTAL ANALYSIS

Successful strategic management depends on an accurate and thorough evaluation of the
environment. Environmental scanning is the systematic monitoring of the major external
forces influencing the organization. The firm’s competitive environment includes rival
firms, buyers, suppliers, new entrants and substitutes.
A. Competitive Environment
By monitoring the external environment, organizations can identify those trends that
may affect the organization and its HR programs.
1. Customers
One of the most important environmental assessments a firm can make is
identifying the needs of its customers, which often differ from one another.
Organizations ultimately, need to know how they are going to provide value to
these people. This is the foundation for strategy, and it influences the kind of
skills and behavior that will be needed from employees.
2. Rival Firms
Examining the nature of one’s competitors seems obvious, but often it is not. For
example, Toys ‘R’ Us believed for many years its main competitors were FAO
Schwartz or KB Toys. But it later found out that big box retailers like Wal-Mart
and Target were successfully capturing some of its market share. These rival
firms altered Toys ‘R’ Us’s strategy.
3. New Entrants
Sometimes new entrants can compete with established firms and sometimes they
can’t, especially if the incumbent firms create entry barriers. Sometimes,
however, new entrants do capture market share when they have a better business
model or change the “rules” of the competitive game.
4. Substitutes
Sometimes the biggest threat to an industry is not direct competition, but
substitutes for their products. The effect VOIP is having on the telephone industry
and the Internet on travel agents are two examples of substitutes.
5. Suppliers
Organizations rarely create everything on their own but instead have suppliers
that provide them with inputs, including money, information and people.
16 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
16

IV. STEP THREE: INTERNAL ANALYSIS

Note to students that in addition to scanning the external environment, organizations

should also scan their internal environments by taking an inventory of the firm’s skills,
particularly its intellectual capabilities.
A. The Three Cs: Capabilities, Composition and Culture
1. Capabilities: People as a Strategic Resource
The success of organizations increasingly depends on people-embodied know-
how—the knowledge, skills, and abilities of an organization’s members. This
knowledge base is the foundation of an organization’s core capabilities
(integrated knowledge sets within an organization that distinguish it from its
competitors and deliver value to customers). As a result, many firms are seeing
the value of tailoring the training for their employees and helping them to develop
personalized career paths. Competitive advantage through people depends on
organizations achieving four criteria:
Valuable—People are a source of competitive advantage when they
improve the efficiency or effectiveness of the company. Value is increased
when employees find ways to decrease costs, provide something unique to
customers, or achieve some combination of the two. Nordstrom and UPS
are among the companies that utilize employee empowerment programs,
total-quality and continuous improvement efforts, and flexible work
arrangements to motivate and spark the creativity of their workers.
Rare—People are a source of competitive advantage when their skills,
knowledge, and abilities are not equally available to all competitors.
Difficult to Imitate— People are a source of competitive advantage
when employee capabilities and contributions cannot be copied by
others.
Organized—People are a source of competitive advantage when their
talents can be combined and they can be rapidly deployed to work on new
assignments at a moment’s notice.
2. Composition: The Human Capital Architecture
Figure 2.3 will be useful in your discussion of this portion of the chapter.
The composition of the firm’s workforce is the result of the firm’s decisions about
whom to employ externally and internally and how to manage different types of
employees. Different employees occupy different segments in the firm’s
architecture, or employment matrix.
a. Strategic Knowledge Workers—Employees linked directly to the firm’s
strategy. The firm tends to make a long-term commitment to these people.
b. Core Employees—People with valuable skills but skills that are not
particularly unique (salespeople, e.g.). Managers invest less training in these
people and tend to focus more on short-term commitments with them.
17 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
17

c. Supporting Workers—People who have skills that are less strategic in

value to firms and are generally available to all firms (clerical workers,
e.g.). Workers such as these are often hired from agencies. The scope of
their duties is generally limited, and the firm invests less in them in terms
of training and development.
d. Partners and Complementary Skills —People who have skills that are
unique but not necessarily related to a company’s core strategy (attorneys,
e.g.). Companies tend to form long-term alliances with these people.
3. Corporate Culture: Values, Assumptions, Beliefs, and Expectations (VABES)
Cultural audits help companies examine the attitudes and activities of the
workforce. Employee surveys can be used to measure how employees feel about
the corporation, their workload, bosses, morale level, and so forth. Managers need
to understand how employees view the organization before HR planning can
effectively take place.
B. Forecasting: A Critical Element of Planning
Figures 2.4 – 5 and Highlights in HRM 1 will be useful in your discussion of
forecasting. Forecasting involves estimating in advance the number and types of
people needed to meet the organization’s objectives (demand), forecasting the supply
of labor, and then balancing the two.
1. Forecasting a Firm’s Demand for Employees
There are two approaches to forecasting:
a. Quantitative Approaches—Quantitative, or top-down approaches, use
statistical or mathematical techniques. For example, trend analysis
forecasts employment needs based on a business factor, such as sales
revenue, and a ratio of labor productivity.
b. Qualitative Approaches—The second forecasting technique is the
qualitative, or bottom-up, approach. This approach is less statistical and
attempts to reconcile the interests, abilities, and aspirations of individual
employees with the current and future staffing needs of the organization.
Management forecasts (i.e., judgments of supervisors or other persons
knowledgeable about future employment needs) and the Delphi
technique (i.e., judgments about a preselected group of individuals) are
examples of the qualitative approach to forecasting.
Considerations: When forecasting the demand for employees, managers
must consider changes in technology, labor force demographics, and
various organizational concerns such as the firm’s financial position,
administrative changes, and long- and short-term growth plans. Ideally,
forecasting should include the use of both quantitative and qualitative
approaches.
18 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
18

2. Forecasting the Supply of Employees

Figure 2.5 will be useful in your discussion of employee supply forecasting.
Supply analysis is concerned with determining if the numbers and types of
employees needed are available to staff projected vacancies. Supply analysis starts
with an internal evaluation of the firm’s existing supply of employees. If employees
are not currently available, an external evaluation of the human resources supply
will be made.
a. Staffing Tables and Markov Analysis—Staffing tables are pictorial
representations of all the organization’s jobs, along with the numbers of
employees currently holding those jobs plus any future employment
requirements. A Markov analysis shows the pattern of movement of
employees from one year to the next.
b. Skills Inventories and Management Inventories—HR professionals and
other managers will also review the skills inventories kept on present
employees. Quality of Fill measures how well new hires are performing,
Skills inventories and management inventories (i.e., those inventories
kept on management employees) can be used to develop employee
replacement charts that help with succession planning.
c. Replacement Charts and Succession Planning— Both skill and
management inventories—broadly referred to as talent inventories—can
be used to develop employee replacement charts, which list current
jobholders and identify possible replacements should openings occur.
C. Assessing a Firm’s Human Capital Readiness: Gap Analysis
Any difference between the quantity and quality of employees required versus the
quantity and quality of those available represents a gap that needs to be remedied.
V. STEP FOUR: FORMULATING STRATEGY
Figures 2.9 will be useful in your discussion of strategy.
After the firm’s managers have analyzed the internal and external strengths and
weaknesses of their company, they need to do a SWOT analysis (an analysis of the firm’s
strengths, weaknesses, opportunities and threats) in order to develop the organization’s
corporate, business and functional strategies.
A. Corporate Strategy
Firms have to decide about how and where they will complete. These decisions involve
whether to pursue a growth strategy or a diversification strategy, or whether to engage
in a merger or acquisition or form strategic alliances, for example. This directly impacts
their HR decisions.
19 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
19

1. Growth and Diversification

Firms that plan to grow are more likely to hire more employees. Globalization
plans, for example, often require the firm to recruit internationally, which poses a
number of difficulties. Because a company’s growth plans can face limitations as
a result of a lack of talent, HR managers need to be involved in these decisions
early on for the firm’s corporate strategy is to succeed.
2. Mergers and Acquisitions
By contrast, firms that plan to merge or acquire other firms are more likely to
downsize as overlap in functions are cut. Many mergers fail for various reasons,
many of which are cultural. HR plays a crucial role when it comes to integrating
the employees of different companies.
3. Strategic Alliances and Joint Ventures
Downsizing is a less of a threat with strategic alliances, but many of the “people
issues” related to mergers and acquisitions remain the same.
B. Business Strategy
Whereas corporate strategy can be thought of the domain in which the company
competes, the firm’s business strategy focuses on how the firm can create more value
for customers than its rivals. The strategies below are among those the firm can use:
1. Low-Cost Strategy: Compete on Productivity and Efficiency
This is the strategy pursued by firms such as Wal-Mart and Southwest Airlines. A
low-cost strategy does not necessarily equal a low-cost labor strategy, however.
Starbucks is a case in point. Even though labor generally represents a firm’s
largest cost, the firm can choose to save money in other ways. Moreover, to retain
their jobs, motivated, well-paid employees are more likely to be inclined to work
efficiently and cut costs to help their firms remain competitive.
2. Differentiation Strategy: Compete on Unique Value Added
Competing on the basis of better products, innovative features, speed to market,
and superior service allows a company to offer something unique and distinctive
to customers that competitors will have difficulty imitating. For example,
companies that focus on cost cutting don’t generally empower their employees to
provide great customers service like firms such as Neiman Marcus do. It is the job
of HR managers to help firms find ways to develop employees so they add more
customer value and gives the firm a competitive edge.
C. Functional Strategy: Ensuring Alignment
HR managers must translate the firm’s overall corporate and business strategies into
HR strategies that functional managers can pursue. HR managers do this by focusing
on two types of “fit”: external and internal fit.
1. Vertical Fit/Alignment
Vertical fit focuses on the connection between the firm’s business strategy and how
it goes about achieving it. A firm that focuses on a low-cost strategy is likely to
foster HR practices that promote productivity and efficiency. By contrast, a
20 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
20

firm that focuses on differentiation and value added is more likely to focus on
new product development and employee development initiatives. In other words,
there needs to be a “fit” between the firm’s external objectives and the focus of its
personnel.
2. Horizontal Fit/Alignment
Horizontal fit means that HR practices are all aligned with one another to establish
a configuration that is mutually reinforcing.

VI. STEP FIVE: STRATEGY IMPLEMENTATION

Formulating and HR strategy is only half of the battle, however. The strategy must also be
implemented. Point out that this is easier said than done in light of a recent survey that
revealed that about half of managers say there is a gap between their organization’s ability
to develop a vision and strategy and actually execute it.
A. Taking Action: Reconciling Supply and Demand
Employment forecasts must be reconciled against the internal and the external
supplies of labor the firm faces. If there is a labor shortage, the firm might have to
reformulate its long- and short-term strategic plans. Emphasize to students that an
increasingly vital element of strategic planning for HR departments is determining if
people are available, internally or externally, to execute an organization’s strategy.
VII. STEP SIX: EVALUATION AND ASSESSMENT
Measurement, benchmarking, alignment, fit, and flexibility are central elements of the HR
evaluation process. Although evaluation and assessment appear to wrap up HR strategy
planning, the results uncovered in this step serve as the inputs for the next round of HR
strategy and planning the firm engages in.
A. Evaluation and Assessment Issues
Benchmarking is the process of identifying best practices in a given area, and then
comparing the practices against those of competitors. There are two kinds of
benchmarking metrics than can be used in human resource strategy: Human capital
metrics (which assess the capabilities of the workforce), and HR metrics (which
assess the effectiveness of the firm’s HR function itself). Point out that benchmarking
alone won’t give a firm a competitive advantage. Because a competitive advantage is
based on the unique combination of a company’s human capital, strategy, and core
capabilities, which differ from firm to firm.
B. Measuring a Firm’s Strategic Alignment
1. Strategy Mapping and the Balanced Scorecard
The Balanced Scorecard (BSC) developed by Harvard professors Robert Kaplan
and David Norton helps HR managers translate strategic goals into operation
objectives. The four related and linked cells of the framework are (1), customer,
(2) customer (3) processes, and (4) learning. Metrics for each of the four areas and
obtained and goals set.
21 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
21

2. Measuring Horizontal Fit

Recall that internal fit means that the firm’s HR practices are all aligned with one
another. However, a company could achieve an internal alignment that is actually
at odds with its overall corporate and business strategy. To prevent this from
occurring, both internal and external alignment needs to be assessed.
C. Ensuring Strategic Flexibility for the Future
In addition to achieving fit, HRP focuses on organizational capability—the capacity of
the organization to act and change in pursuit of a sustainable competitive advantage.
Coordination flexibility occurs through rapid reallocation of resource to new or
changing needs. Resource flexibility results from having people who can do many
different things in different ways.
22 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
22

ANSWERS TO END-OF-CHAPTER DISCUSSION QUESTIONS

1. The three key elements of the HRP model are (1) employment forecasting, (2) supply
analysis, and (3) balancing supply and demand considerations. Employment forecasting
estimates the numbers and types of people needed to meet organizational objectives. Supply
analysis then determines if the numbers and types of people needed are available either
externally or internally. The final step in HRP is to balance the required number of employees
with those available. If inconsistencies exist, changes in the staffing requirements or firm’s
strategy may be needed.
2. The “five forces” are customers, rival firms, new entrants, substitutes, and suppliers, as outlined
in Figure 2.2.
3. The human capital must be valuable, rare, difficult to imitate, and organized in a way that
adds more value to the product than can be added by competitors.
4. Ideally both qualitative and quantitative approaches should be used in combination.
5. A firm’s business strategy is a more focused navigation of the domain in which the company
competes. Its ability to do well ultimately depends on the choices it makes in both arenas.
Therefore, both strategic focuses need to be honed.
6. HR managers first gauge demand based on forecasted trends in business activity using both
quantitative and qualitative methods. The Monthly Labor Review and Occupational Outlook
Handbook, published by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor,
as well as local chambers of commerce and individual state development and planning agencies
compile labor market analyses (quantitative). The firm’s functional managers should also
provide a qualitative assessment of the labor supply the firm will need. This involves both
tracking current staffing levels and making projections about the levels the firm will have
to have to compete strategically in the future. Tools like staffing tables, Markov analysis,
skills inventories, replacement charts, and succession planning charts can help managers with
this process. Balancing the two—labor supply and demand—then requires HR managers
to take action—either by actively recruiting full-time or part-time employees with the skills
the firm believes it will need, hiring temporary employees, trimming back employees via
attrition or downsizing, or outsourcing and offshoring employees.
7. Organizational capability helps firms adjust to changes in employee supply and demand and
changes in its competitive situation. HR managers can help with this endeavor by being
prepared for the future in terms of the firm’s human resource needs and implementing
training programs (cross-training, job rotation, team-based work methods, and so forth) to
make the firm’s current employees more flexible so they can adeptly respond to changes.
23 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
23

ANSWERS TO USING THE INTERNET ACTIVITIES

Internet Exercise #1, page 56

Beacon Hill Staffing Group

http://www.beaconhillstaffing.com

Question:
Beacon Hill Staffing Group provides employment services to job seekers and employers. Visit
the Beacon Hill website and search for company resources on contract employee benefits.
Describe the benefits that are offered to contract employees. How do these benefits compare to
those typically offered to permanent employees? In your opinion, are they adequate?

Answer:
Beacon Hill Staffing offers Medical, Dental, and Vision insurance, an ADP 401(k) Plan and an
ADP Roth 401(k) plan. Beacon Hill Contract Employees are eligible for group benefits on the first
of the month following 12 consecutive weeks of employment while maintaining an average of 35
hours per work week. In comparing these benefits with those offered to permanent
employees, student responses will vary. Permanent, full-time employees typically receive
benefits beginning with the first day of work.

Source:
http://www.beaconhillstaffing.com/matriarch/documents/Microsoft%20Word%20-
%202008%20Temp%20Benefits%20overview.pdf

Internet Exercise #2, page 75

HR Metrics Service
http://www.hrmetricsservice.org/

Question:
HR Metrics Service provides tailored benchmarking reports to help organizations assess their
performance within their respective industries. Visit the HR Metrics Service web site and search
for benchmarking standards that the company identifies in its reports. List and describe at least
five benchmarking standards.

Answer:
HR Metrics Service provides seven categories of metrics in its benchmarking reports. Below are
some example metrics for each category:
24 Chapter 2: Strategy and Human Resources Planning Part 1: Human Resources Management in Perspective
24

Productivity metrics – Revenue per FTE, Profit per FTE

Compensation metrics – Labor cost per FTE, Labor cost expense percent
Recruitment metrics – Vacancy rate, External hire ratio
Retention metrics – Resignation rate, Voluntary turnover rate
HR efficiency metrics – HR FTE ratio, HR headcount ratio
Learning and development metrics – Learning and development investment per FTE,
Learning and development hours per FTE
Workforce demographic metrics – Union percentage, Percentage diversity at
management level

Source:
http://www.hrmetricsservice.org/0/pdf/standards_glossary.pdf
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